12. Compute exchange rates, FX appreciations, and USD profits below of this U.S.-based company that makes autoparts in China (paying CNY) and sells to Germany (receiving EUR). Foreign revenues and costs increase with foreign country inflation. Compute profits under two scenarios (1) the exchange rates at T-1 are equal to PPP forecast, or (2) the actual T=1 exchange rates provided below. Revenues in EUR T=0 Costs in CNY T=0 USDCNY T=0 Actual USDCNY T=1 Actual EURUSD T=0 Actual EURUSD T=1 Actual U.S. Inflation China Inflation Germany Inflation USDCNY T=1 PPP EURUSD T=1 PPP USDCNY Real Rate T=1 EURUSD Real Rate T=1 CNY Real Appreciation EUR Real Appreciation Revenues in EUR T=1 with German infl. Costs in CNY T=1 wich China inflation Profits if FX rates = PPP forecasts Revenue (USD) Costs (USD) Profit (USD) Profits if FX rates = Actual FX rates Revenue (USD) Costs (USD) Profit (USD) S S ???? ???? ???? ???? ????? ????? 1,000,000 6,000,000 ????? ????? ???? ???? ???? ???? ???? ???? 1.1050 1.0524 6.50 6.80 0.00% 25.00% 5.00% T=0 T=0 T=1 ???? ???? ????? ???? ???? ???? T=1 % Change #VALUE! #VALUE! #VALUE! % Change #VALUE! #VALUE! #VALUE!
12. Compute exchange rates, FX appreciations, and USD profits below of this U.S.-based company that makes autoparts in China (paying CNY) and sells to Germany (receiving EUR). Foreign revenues and costs increase with foreign country inflation. Compute profits under two scenarios (1) the exchange rates at T-1 are equal to PPP forecast, or (2) the actual T=1 exchange rates provided below. Revenues in EUR T=0 Costs in CNY T=0 USDCNY T=0 Actual USDCNY T=1 Actual EURUSD T=0 Actual EURUSD T=1 Actual U.S. Inflation China Inflation Germany Inflation USDCNY T=1 PPP EURUSD T=1 PPP USDCNY Real Rate T=1 EURUSD Real Rate T=1 CNY Real Appreciation EUR Real Appreciation Revenues in EUR T=1 with German infl. Costs in CNY T=1 wich China inflation Profits if FX rates = PPP forecasts Revenue (USD) Costs (USD) Profit (USD) Profits if FX rates = Actual FX rates Revenue (USD) Costs (USD) Profit (USD) S S ???? ???? ???? ???? ????? ????? 1,000,000 6,000,000 ????? ????? ???? ???? ???? ???? ???? ???? 1.1050 1.0524 6.50 6.80 0.00% 25.00% 5.00% T=0 T=0 T=1 ???? ???? ????? ???? ???? ???? T=1 % Change #VALUE! #VALUE! #VALUE! % Change #VALUE! #VALUE! #VALUE!
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 25QA
Related questions
Question
1
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning